Notables From The PMC-Sierra Q207 Conference Call

Here’s a quick snapshot of the PMC-Sierra (PMCS) FQ207 conference call.

• Revenue up slightly based on the strength of storage and FTTH chips
• Headcount down from 1182 to 1057 with a corresponding reduction in opex.
• “Market Conditions Improving,” with Video being cited as the big driver. I still would like to see someone somewhere step up to the plate and quantify this effect. Without data, this is another “internet traffic doubling every nine months” type of proclamation.
• Expected continued market improvement through the end of the year.
• Lots of storage design wins in SAS (Serial Attached SCSI), though it is still less than 10% of their storage business. Storage featured prominently in the “Design Win Parade” that characterizes investor calls for component companies (they never tell you what they lost).
• China is biggest area of strength, particularly in Metro Optical and Wireless Infrastructure. “Chinese OEMs are driving telecom growth.”
• FTTH revenue up in China and Korea. NTT committed to 3.2M ONU installs in Japan in the year ending March 08.
• More R&D directed at GPON. Bigger focus going forward. They think world will be 60%/40% GEPON/GPON, while rest of world thinks 40/60. I agree with PMC.
• Some odd Q&A about Cable companies using PON. This is something I uncovered months back (see “PON Moves Towards the Enterprise“), but it is the first mention I’ve heard in a public forum from a public company. CEO Bailey backtracked a bit, but it sounds like the cat is getting out of the bag. I’ve heard all kinds of stories about cable deploying fiber - I think the only conclusion one can reach at this point is they are going to do something beyond coax.
• Outlook is $112-$115M next quarter, up from $108.9 this Q. No mention what the deferred component will be next Q. I am assuming $112-$115 includes deferred revenue, which they don’t report on the formal P&L. This Pro Forma accounting is out of hand and the P&L is tough to digest. The key metric: Net Cash is up about $25M in the last six months.

Market liked the call. What did you think?

PMCS 1-yr chart:

Disclosure: Author owns no position in PMCS.

Comments

[numinary:]

Regarding your desire to see someone quantify the bandwidth increase, the best "recent" summary that i've seen is the IEEE material on the need for a higher speed ethernet. a lot of folks really tried to find as much data as possible...

note that none of this has direct bearing on PMCS, but rather on general market trends

Call For Interest Material
www.ieee802.org/3/cfi/...

Market Drivers for 100 Gigabit Ethernet
www.ieee802.org/3/hssg...

2007 Jul 24 10:53 AM

[Andrew Schmitt:]

Thanks, some useful info in there but nothing that ties video in to the data.

2007 Aug 03 10:25 AM